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Week 7 ECO 103 Functions and Equations updated

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40 views14 pages

Week 7 ECO 103 Functions and Equations updated

Uploaded by

justobun
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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ECO 103: Introductory Mathematics for

Economists
Economic Applications of Functions,
Equations & Graphical Illustrations.

Dr. Stanley Nwani


2

Areas of Economic Applications

DEMAND & SUPPLY ANALYSIS.

REVENUE/COST/BREAK-EVEN ANALYSIS.

INCOME DETERMINATION.

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Equations
A mathematical statement setting two
algebraic expressions equal is called an
equation.
y = mx + b Linear
=0 Quadratic

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Functions
Y = f(X)
In a function, for each value of x, there can be
one and only one value of y.

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DEMAND-SUPPLY ANALYSIS

Given that = 10-3p, & -5+2p

Show the market clearing price and quantity


and produce the graph of the functions.

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Classwork 1: Extension to Excess on Demand & Supply


The supply function S(q) and the demand function
D(q) of a commodity are given by
Ps= 400 + 15q
Pd = 900 – 5q, where q is the quantity, calculate;
(a) the equilibrium quantity.
(b) the equilibrium price.
(c) depict your solution graphically.
(d) if the government fixes equilibrium price at
N950, what would be the market implications?
(e) if the regulated price is N500, discuss the market
implications with the aid of graphs.
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Classwork 2
In a perfect market condition, a firm’s demand
and supply functions are given as:

P+-3Q -20 =0
P-3

Determine the market clearing requirements.

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REVENUE/COST/BREAK-EVEN ANALYSIS

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Case One
Mr. AYAGET, a businessman, spends N2.5m to
set up a workshop where some items are
produced. If it costs N500 to produce an item
and the sale price of an item is N1,500, find
the minimum quantity of items to be
produced and sold for the businessman to
make a profit of:
i. At least N950,000
ii. At most N1,500,000
Solution
Let the product be Q
Profit = TR – TC
TC = FC + VC
FC = 2,500,000
VC = 500Q
TC = 2,500,000+500Q….. I
TR = P.Q
P= 1500
TR = 1500Q…… II
Profit = 1500Q- 2,500,000- 500Q = 1000Q-2,500,000
At least N950,000 At most N1,500,000
1000Q- 2,500,000 ≥ 1000Q- 2,500,000 ≤
950,000 1,500,000

Find Q? Find Q?
12

Exercise 1 for students


The demand and supply functions for cooperative
kings’ meals are respectively given below:
Pd = 17,500 -100q
Ps =
Required:
i. Compute the market clearing price and quantity
ii. If the hostel manager established the price of
meal to be N10,000, discuss the market
implications of his decision.
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Additional Reading on the topic


Dowling, E. T. (2001). Introduction to
mathematical economics, McGraw-Hill.
file:///C:/Users/acer/Downloads/dowling_-_s
uppelemntary.pdf
“Chapter One: Review“
Alpha C. Chiang (1984). Fundamental
Methods of Mathematical Economics (Third
Edition), McGraw-Hill. Part One Pages 1-32.

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